You can download free ebooks (from sites like Project Gutenberg) directly, so the T1 should be able to do it from other websites. I've successfully borrowed 1 ebook from the library directly through the T1, but since then they won't download to the reader, while the library reckons you have.
You can't buy ebooks directly through the T1 in Australia as yet, and many people can't get ADE to work either. So you'll need to use another programme to manage your ebook collection.
While I like the T1 overall, it seems as though Sony has released it prematurely into the Australian market as they haven't solved the ADE issue for our region! If you're prepared to use a 3rd party programme to liase with the T1 and do a little "tweaking" to get things to work, it's a good option.
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